The AUDGBP exchange rate was flat on Monday after the pair opened at new yearly lows below the 0.5300 level. This is an important week for the pair with the Australian Reserve Bank meeting on Tuesday, followed by the Bank of England on Thursday. Both banks will hold rates steady at record lows and traders will be looking for updates on the future rate and stimulus plans for both sets of policymakers.
The AUD to GBP pair trades at 0.5280 with the Aussie dollar struggling due to the Sydney lockdown.
Australian police requests support from army
The Australian dollar was weighed again as Sydney’s lockdown entered a sixth week of lockdown, with the army patrolling the streets after a request by the police commissioner. Brisbane also extended its recent three-day lockdown on Monday.
Around 300 army personnel will be going door to door to ensure that those who have tested positive are isolating at home.
Aussie Prime Minister Scott Morrison has promised the lockdowns would be “less likely” once the country vaccinates 70% of its population, but the figure currently stands at 19%. The country is expected to reach the target by year-end but it will continue to see the British pound supported over the next months.
The Australian Reserve Bank meets on Tuesday with some analysts expecting a u-turn from the bank on tapering. The bank’s chief Philip Lowe may have to walk back the tapering plans made just a month ago, after a resurgence of the coronavirus rocked the Australian economic rebound.
Lowe is expected to delay plans to scale back weekly bond purchases, while keeping the current interest rate at 0.1% on Tuesday.
Bank of England in a similar position to RBA
The UK has seen a drop in virus cases on the week of 30% which helps the case for the continued reopening of the economy.
With no other economic data ahead until the bank meets on Thursday, the RBA will be the driver. But the Bank of England find themselves in a similar position to the RBA with the recent virus uncertainty and any near-term changes to the bank’s policy is unlikely. That’s the view of ING bank analysts, who said the recent rise in coronavirus uncertainty would likely nullify any hawkish sentiment from the BoE on Thursday. Analysts at the bank see policymakers holding back any clues on the first, while they also see it as unlikely that the BoE will offer up any early stimulus tapering.
The bank are hoping to hear comments about the Bank’s future tapering plans, which will likely happen a little earlier due to the recent inflation surge. The first rate hike for the UK economy is not seen until early 2023.
The Aussie dollar will remain under pressure against the pound and after the recent uncertainty, both central banks are unlikely to provide any new updates on their policies. That should see virus headlines continue to drive the pair.